Gaining insight from an insider transaction
The challenge remains inferring what Mr.Mulva’s actions say specifically about the company. His confidence in Exxon’s future seems clear, but as educated investors we should understand why he acquired the shares at the price he did and why now. Seeking Alpha’s April 11 story explains that Exxon Mobil Corporation (NYSE:XOM) and other oil companies “say they could spend $15 billion building a gas liquefaction plant on Russia’s Pacific coast in a move to jump start the country’s attempts to ship the fuel to Asian markets.”
The Wall Street Journal article that Seeking Alpha cites expands the picture by explaining,
“The plant could start shipping gas from 2018, Rosneft’s chief executive said, finally bringing significant sales of gas from one of the country’s first energy joint ventures, which Exxon first agreed to develop in 1996. The companies in February said they would study the feasibility of the plant, but Thursday’s comments provide the first indication of the scale and timing of their plan. The firms will decide whether to go ahead by June.”
Perhaps Mr. Mulva’s share purchases express his confidence in not only the plan but a decision to in fact move forward in June, a move that seems likely to help the company’s earnings in the long term.
By the numbers
Despite recent downgrades, Exxon Mobil Corporation (NYSE:XOM) continues to be an attractive option for investors interested in expanding a large-cap portfolio. Exxon’s gas liquefaction plant illustrates its forward-thinking approach to business. Mr. Mulva underscores this commitment to the future when he says, “at the base of all this is technology and we have dedicated a lot of money and a lot of time to technology, we’re a technology company.” However, it cannot be ignored that many of these points are part of a soft analysis of the company. The numbers present a more concrete outlook.
Exxon’s ROE and ROA still outpace the industry averages at 28.0 and 13.5 respectively. Additionally, the book value per share and dividend payments have increased nearly every year. Exxon Mobil Corporation (NYSE:XOM) shares have outperformed competitors like Shell and TOTAL S.A. (NYSE:TOT) in the last three months, although Shell yields over 5% and many believe it may be a good buy at current levels. The solid balance sheet also earned the trust of some of the largest asset managers in the world including the Vanguard Total International Index, the Vanguard Institutional Index and the SSgA S&P 500 Index.
As with any share purchase, the challenge is to balance an analysis of the numbers while pointing one ear to the market place and sifting out the telling whispers from the cacophony of media buzz and short-term hysteria. Mr. Mulva’s share purchase might just be that whisper.
The article One Reason to Be Excited About Exxon originally appeared on Fool.com.
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